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Wednesday, July 17, 2013

Yahoo: $5 Billion Share Buyback Program

Yahoo has released its Q2 earnings, and a this have given everyone the answer they are waiting for — yes, Yahoo still has plenty of cash to pursue more acquisitions. This all lies in the company’s share buyback program. “During the second quarter of 2013 Yahoo repurchased 25 million shares for $653 million,” here is the release for this. Those are part of a bigger $5 billion program. These shares can be reissued and sold for cold cash any day.

Last September 2012, Marissa Mayer decided to sell 40 percent of Yahoo’s stake in Alibaba for $7.6 billion. $3.65 billion was put aside to reinvest in Yahoo shares, giving that the company has confidence in its own future.

“We are happy to announce that as of today we have essentially completed our commitment to return $3.65 billion from our Alibaba Group proceeds to shareholders, repurchasing a total of 190 million shares,” wrote CFO Ken Goldman in today’s earnings release.

Yahoo will be growing further and further. It has a $5 billion share buyback authorization with the SEC and it will be planning on using this authorization in full. Reports of the disappearance of Yahoo’s cash after the $1.1 billion Tumblr acquisition have been greatly exaggerated. Yahoo bought Tumblr for $1.1 billion in mostly cash in hopes that it will continue to grow and define it's image as a mega company with social influence. Tumblr has 300 million monthly unique visitors and is expecting to have a growth in traffic of %20.

If you are not familiar with a stock buyback program, the stock can either be canceled or reissued at a later date. If it is reissued it is a big win for the company because the existing shares are not over saturated and the new shares just keep the same stock number, just like it was before.

Yahoo if very confident that there is no better investment than its own stock. Yahoo ever so slightly raises the price of existing shares as there are less outstanding shares.